The necessary targeting of unexplained wealth
It is no secret that revenue authorities take a keen interest in the unexplained wealth of individuals.
In some instances, for example, where wealth is prominently displayed on social media, it may be relatively easy for the South African Revenue Service (“SARS”) to gather information regarding unexplained wealth – as appears to be the case in CSARS v Hamiltonn Holdings (Pty) Ltd and Others (Case No. 2020/35696) where the High Court noted as follows:
“Ndlovu is solely responsible for SARS taking an interest in his affairs and that of the respondents. He thrust himself out of obscurity by doing two things. First, in May 2020, he bought five luxury vehicles at the about same time as certain of the other respondents received payment for lucrative contracts… The collective value of the cars is said to be R10.5m. Then he bragged about this feat on social media. Apparently, there are people at SARS who trouble to follow social media. They looked at his tax affairs and were impressed that Ndlovu had spared SARS the burden of reading any tax returns since 2016. They referred the big spender to the Illicit Economy Unit who have a keen interest in mismatched income and expenditure phenomena...”
Notably, in many instances investigations into unexplained wealth may be resource intensive and costly. In this regard, SARS, the National Prosecuting Authority, the Directorate of Priority Crime Investigation, the Department of Justice and the Financial Intelligence Centre - operating under the Anti-Corruption Task Team have recently issued a media statement indicating that they are collaborating to deprive persons who support their lavish lifestyles from unexplained wealth.
This initiative is aimed at making it simpler, more cost-efficient and expedient to investigate and recover assets though suspected unlawful activities such as corruption, fraud, tax evasion and money laundering. This should place South Africa in a better position to confiscate criminal proceeds in accordance with the recommendations of the Financial Action Task Force – an intergovernmental organisation aimed at combatting money laundering.
The media statement indicates that law enforcement agencies will use existing asset recovery legislation to secure appropriate orders issued by our courts to confiscate unexplained wealth, thereby enabling the South African authorities to recover suspected illicit gains.
South Africa’s inter-agency initiative accordingly aims to strengthen and supplement the use of existing legal frameworks to preserve and forfeit assets by targeting unexplained wealth. In addition, the initiative seeks to determine whether existing legislation can be effectively used or if it should be expanded with a standalone “Unexplained Wealth Order” (UWO) legislative framework.
The participating agencies have entered into an inter-agency memorandum of agreement to formalise their collaboration and the practical implementation of the initiative in the cases to be selected, and to regulate the confidentiality of information to be shared amongst the agencies.
In accordance with the media statement, preparatory activities for the next phase are currently in progress in order to select an appropriate case to test the existing provisions that target unexplained wealth in the courts.
This collaboration between the various participating government agencies is welcomed in light of the loss which the fiscus endures due to fraudulent and otherwise illegal activities.
PKF Cape Town
The information provided herein may not be construed as legal and/or tax advice. Professional advice should be sought with reference to specific background facts before any action is taken based on the information contained